1.1 Deduction of tax by certain individuals or HUF: Presently, there is no requirement for an individual or HUF to deduct tax at source on payments made to a resident contractor or professional when it is for personal use, or if the individual or HUF is not subjected to audit for his business or profession. It is proposed to insert a new provision making it obligatory for such individual or HUF to deduct tax at source at the rate of five per cent. if the annual payment made to a contractor or professional exceeds Rs. 50 lakh. It is also proposed that a person deducting tax under this section shall be able to deposit TDS on the basis of the Permanent Account Number (PAN) only. It is also proposed to enable filing of application for issue of certificate for nil or lower rate of TDS.
1.2 Consideration for TDS on immovable property: It is proposed to provide that for the purpose of tax deduction at source from payment made for acquisition of immovable property, consideration shall include other charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance fee, advance fee or any other charges of similar nature which are incidental to the purchase of immovable property.
1.3 Gifts made to non-residents: Presently, gifts made by a resident to another resident are liable for income tax subject to some exemptions. It is proposed to provide that gift of any sum of money, or property situated in India, by a person resident in India to a person outside India (not being a gift otherwise exempt), on or after 5th day of July 2019, shall be deemed to accrue or arise in India.
1.4 Compulsory filing of return: It is proposed to make return filing compulsory for persons, who have deposited more than Rs. 1 crore in a current account in a year, or who have expended more than Rs. 2 lakh on foreign travel or more than Rs. 1 lakh on electricity consumption in a year or who fulfils the prescribed conditions, in order to ensure that persons who enter into high value transactions also furnish return of income. It is also proposed to provide that a person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains shall also be required to furnish the return.
1.5 Interchangeability of PAN and Aadhaar: It is proposed to provide interchangeability of PAN and Aadhaar to enable a person who does not have PAN but has Aadhaar to use Aadhaar in place of PAN under the Act. The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI). It is also proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN under the Act.
1.6 Quoting of PAN/Aadhaar: In order to track high value transactions, it is proposed to provide that the quoting and authentication of PAN/Aadhaar shall be mandatory for certain prescribed transactions. It is also proposed to provide that the person receiving relevant documents shall ensure correct quoting and authentication of PAN/Aadhaar for the prescribed transactions. To ensure compliance of these provisions it is also proposed to amend the relevant penalty provisions.
1.7 Consequences of not linking Aadhaar with PAN: Presently, the Act provides for making PAN invalid if it is not linked with Aadhaar within a notified date. In order to protect past transactions carried out through such PAN, it is proposed to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner after the date notified for the said linking.
2.1 Payment by other electronic modes: There are various provisions in the Act which prohibit cash transactions and allow or encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account. To promote other electronic modes of payment, it is proposed to amend these provisions to also allow payment or receipt through other prescribed electronic modes.
2.2 TDS on cash withdrawal from banks: In order to discourage large amount of cash withdrawal from bank accounts, it is proposed to provide for tax deduction at source at the rate of 2% on cash withdrawal by a person in excess of Rs. 1 crore in a year from his bank account. Some business models, where large cash withdrawal is a necessity, are proposed to be exempted. It is also proposed that the Central Government may notify the persons to whom these provisions shall not be applicable in consultation with the Reserve Bank of India.
3.1 International Financial Services Centre (IFSC):In order to promote the development of world class financial infrastructure in India, some tax concessions have already been provided in respect of businesses carried on from an IFSC. To further promote such developments and bring the IFSC at par with similar IFSCs in other countries, following additional tax benefits are proposed:
(i) Currently, a unit in the IFSC is allowed deduction of 100% of profits for first five consecutive years and 50% for next five consecutive years from the year of commencement. It is proposed to provide for 100% deduction for 10 consecutive years and also to provide that the unit may claim the said deduction, at its option, for any 10 consecutive years out of 15 years from the year of commencement.
(ii) It is proposed to provide tax exemptions for interest received by a non-resident in respect of monies lent to a unit located in IFSC.
(iii) A non-resident is currently not required to pay capital gains tax on the transfer of specified securities made on a recognised stock exchange in the IFSC. This benefit is proposed to be extended to a Category-III Alternative Investment Fund (AIF) in IFSC of which all the unit holders are non-residents, subject to certain other conditions.
(iv) It is also proposed to notify other securities which shall be eligible for capital gains exemptions if traded on a recognised stock exchange in IFSC by a specified person.
(v) Presently, dividend distribution tax (DDT) is not levied on the distribution of dividend by a company located in IFSC if the same is distributed out of current income. It is proposed to extend this benefit of exemption to distribution out of accumulated profit which has been accumulated by the unit after 1st April, 2017 from operations in IFSC.
(vi) In order to facilitate setting up of mutual funds in the IFSC, it is proposed that there would be no additional tax on distribution of any amount, on or after 1st September, 2019, by a specified Mutual Fund out of its income derived from transactions made on a recognised stock exchange located in any IFSC.
(vii) It is proposed to allow deduction under section 80LA to a non-resident for the purpose of computing tax liability in respect of income of the nature of interest, dividend etc. referred to in section 115A.
3.2 Incentives to certain Non-banking Financial Companies (NBFCs): Presently, interest income on bad or doubtful debts made by NBFCs is charged to tax on accrual basis. However, in cases of scheduled banks, public financial institutions, state financial corporations, state industrial investment corporations, cooperative banks and certain public companies like housing finance companies, interest on bad or doubtful debts is charged to tax on receipt basis. To provide a level playing field, it is proposed that interest on bad or doubtful debts in the case of deposit-taking NBFC and systemically important non deposit-taking NBFC shall be charged to tax on receipt basis. It is also proposed to provide that deduction of such interest shall be allowed to the payer on actual payment.
3.3 Incentives for start-ups: The condition for carry forward and set off of losses in cases of eligible start-ups is proposed to be relaxed enabling them to carry forward their losses on satisfaction of any one of the two conditions, i.e. continuity of 51% shareholding/voting power or continuity of 100% of original shareholders. Further, the provision which allows exemption of capital gains from sale of residential property on investment of net consideration in equity shares of eligible start-up shall be extended by 2 years. Thus the benefit shall be available for sale of residential property on or before 31st March, 2021. The condition of minimum holding of 50% of share capital or voting rights in the start-up is proposed to be relaxed to 25%. The condition restricting transfer of new asset being computer or computer software is also proposed to be relaxed from the current 5 years to 3 years.
3.4 Incentives for resolution of distressed companies: In order to encourage resolution for companies whose board of directors have been suspended by National Company law Tribunal (NCLT) and new Directors have been appointed by NCLT on the recommendation of the Central Government, it is proposed that the conditions of continuity of shareholding for carry forward and set off of losses shall not apply to such companies. It is also proposed to provide that for the purposes of computation of Minimum Alternate Tax (MAT) liability of such companies, the aggregate of brought forward losses and unabsorbed depreciation shall also be allowed as deduction.
3.5 Exemption from deeming of fair market value of shares: In order to facilitate resolution through the approved schemes, where the parties to the transactions do not have control over the determination of price, it is proposed to empower the Board to prescribe transactions for which the provisions relating to deeming of fair market value of shares shall not be applied for computation of capital gains and deemed gift under section 50CA and section 56(2)(x).
3.6 Incentive in respect of Rupee-denominated Bond (RDB): In order to contain the current account deficit and augment the foreign exchange inflow, the Government had issued a press release on 17th September, 2018 exempting interest income of non-resident from RDB issued by a company or a business trust, outside India, during the period 17th September, 2018 to 31st March, 2019. It is proposed to incorporate this tax incentive in the Income-tax Act.
3.7 Incentives to encourage offshore funds: In 2015, the Government had enacted a specific concessional regime to facilitate location of fund managers of offshore funds in India. This was subjected to some conditions. Two of these conditions, relating to the remuneration of fund manager and the time limit for building up of corpus, are proposed to be rationalised so as to facilitate setting up of fund management activity in India with respect to such offshore funds.
3.8 Incentives to Category-II AIF: Presently, the investment made by Category-I AIF is exempted from the applicability of the provisions of section 56(2)(viib) of the Income-tax Act. It is proposed to extend this exemption to Category-II AIF as well.
4.1 Deduction of interest for affordable housing: In order to incentivise purchase of affordable house, it is proposed to provide a deduction upto Rs. 1,50,000 for interest paid on loan taken for purchase of residential house having value upto Rs. 45 lakh. This shall be in addition to the existing interest deduction of Rs. 2 lakh.
6.1 In order to discourage the practice of avoiding Dividend Distribution Tax (DDT) through buy back of shares by listed companies, it is proposed to provide that listed companies shall also be liable to pay additional tax at 20% in case of buy back of share, as is the case currently for unlisted companies.
7.1 It is proposed to relax the definition of ‘demerger’ to allow the resulting company to record the value of the property and liabilities at a value different from the book value in compliance with the Indian Accounting Standards.
7.2 It is proposed to provide that where there is a failure to deduct tax at source on payments made to a non-resident and such non-resident has filed its tax return, paid taxes on such income and has furnished a prescribed certificate from an accountant, the deductor shall not be held as assessee in default. It is also proposed to provide that in such cases, there would not be any corresponding disallowance of expenditure in the hand of deductor.
7.3 It is proposed to clarify that once an Advance Pricing Agreement (APA) has been signed and modified return is filed by the assessee, the Assessing Officer needs to only modify the total income in accordance with the APA.
7.4 It is proposed to simplify the provisions of secondary adjustment (in case of transfer pricing) by providing that instead of interest payment every year, the assessee shall have option of a one-time payment of tax of specified amount.
7.5 It is proposed to clarify that master file needs to be filed even when there is no international transaction and that the Assessing Officer and Commissioner (Appeals) do not have power to call for master file from the assessee.
7.6 It is proposed to provide that concessional rate of short term capital gains tax shall also apply to fund of funds set up for disinvestment of Central Public Sector Enterprises (CPSEs), to which concessional rate of long term capital gains tax has already been extended.
7.7 It is proposed to allow pass through of losses in cases of Category I and II AIF similar to pass through of income which is allowed at present.
7.8 It is proposed to provide that relief for taxes paid in respect of arrears or advance of salary etc. shall be taken into consideration while calculating the amount of self-assessment tax and for computing of interest payable by the assessee.
7.9 It is proposed to provide that tax shall be withheld on taxable payout of life insurance companies on net basis at 5%, instead of 1% on gross as at present.
7.10 It is proposed to provide for determination and computation of under-reported income for penalty purposes in a case where return is furnished for the first time under section 148 of the Act.
7.11 It is proposed to amend the prosecution provision for non-filing of return of income so as to provide reference of self-assessment tax paid before the expiry of the assessment year, and tax collected at source, in the said provision and to increase the threshold of tax payable from Rs. 3,000 to Rs. 10,000, for proceeding against a person.
7.12 To enable fulfilment of our treaty obligations for providing assistance in collection of taxes, it is proposed to provide for recovery of tax in cases where details of property of a specified person is not available but the said person is a resident in India. Correspondingly, India will also be able to request similar assistance from other countries.
7.13 It is proposed to provide that every claim for refund under Chapter XIX of the Act shall be made by furnishing return in accordance with the provisions of section 139 of the Act.
7.14 It is proposed to provide for mechanism for taxation upon violation of conditions, subject to which exemption from applicability of the provisions of section 56(2)(viib) of the Act has been granted to notified persons.
7.15 It is proposed to amend section 56(2)(viii) of the Act consequent to the substitution of section 145A vide Finance Act, 2018.
7.16 Rule 68B of the Second Schedule to the Income Tax Act, 1961 relating to time limit for sale of attached immovable property is proposed to be amended so as to extend the period of limitation from three years to seven years. It is also proposed to empower the Board to extend this period by further period of three years in appropriate cases.
7.17 To prevent fraud, it is proposed to provide for extra time for passing an order under section 201 of the Act for treating a person as assessee in default, when correction statement is filed.
7.18 It is proposed to enable e-filing of statement in respect of transactions from which tax has not been deducted and also to increase the limit of interest payment in consequence to the amendment made in section 194A.
7.19 It is proposed to provide for rationalisation of the definition of “accounting year” for alternate reporting entity which is required to file Country-by-Country report.
7.20 It is proposed to provide for online filing of application by a person making a payment to a non-resident seeking determination of tax to be deducted at source.
7.21 The provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 are proposed to be amended to redefine the term “assessee”, so that it may be clarified that the residential status of the assessee, in the previous year in which the income is earned or the asset is acquired, shall be the determinative factor for charging under the said Act. A clarificatory amendment is also proposed in section 10 of the said Act in respect of reassessment. It is also proposed to provide that the Commissioner (Appeals) shall have the power to enhance a penalty and the Joint Commissioner may issue direction to the assessing officer.
7.22 Section 187 and 191 of the Finance Act, 2016 are proposed to be amended to enable payment of unpaid dues with interest and refund of excess amount paid under the Income Declaration Scheme, 2016.
7.23 Section 99 of the Finance (No.2) Act, 2004, is proposed to be amended to provide that value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be the difference between the settlement price and the strike price.
7.24 It is proposed to extend the tax exemption available to the Special Undertaking of the Unit Trust of India (SUUTI) for a further period of two years till 31st March, 2021.
*A taxpayer is a person who either has filed a return of income or in whose case tax has been deducted but the person has not filed return of income.
(i) 100% tax rebate was provided to individuals having taxable income up to Rs. 5 lakh. Thus, no income-tax is payable by an individual having taxable income up to Rs. 5 lakh.
(ii) The tax rate for corporate assessees was gradually reduced to 25% and currently, only large corporates (with turnover above Rs. 250 crore) are required to pay tax at the rate of 30%. Moreover, even a large new manufacturing company having turnover above Rs. 250 crore is taxed at 25%.
(vi) Standard deduction of Rs. 40,000 was introduced for salaried taxpayers and pensioners and was further increased to Rs. 50,000.
(i) Deduction limit for savings under section 80C was increased from Rs. 1 lakh to Rs. 1.5 lakh.
(ii) The deduction limit for medical insurance was increased from Rs. 15,000 to Rs. 25,000. For senior citizens, the deduction limit was increased from Rs. 20,000 to Rs. 50,000.
(i) Threshold for presumptive taxation of businesses was raised from Rs. 1 crore to Rs. 2 crore.
(i) Deduction of interest on loan taken to purchase self-occupied house property was increased from Rs. 1.5 lakh to Rs. 2 lakh.
(iii) The base year for computation of long term capital gains was shifted from 1981 to 2001.
(iv) Holding period for long-term gain on immovable property was reduced from 36 months to 24 months.
(ii) The scope of investment-linked deduction was broadened by including certain new sectors, including infrastructure, which are critical to growth.
(iii) Investment allowance and higher additional depreciation was provided for undertakings set up in backward regions of states of Andhra Pradesh, Bihar, Telangana and West Bengal.
(iv) Incentive for employment generation was broadened and the conditions for eligibility to claim the incentive were relaxed.
(v) Benefit was provided for computation of MAT liability and carry forward of loss for companies under Insolvency and Bankruptcy Code (IBC).
(vi) Scope of domestic transfer pricing provisions was restricted only for transactions between enterprises having profit-linked deductions.
(vii) Pass through status was provided to Category I & II Alternative Investment Funds (AIFs).
7.1 To this end, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was introduced to address the problem of concealed foreign assets. To target domestic black money, the Benami law was comprehensively amended to enable confiscation of benami property and provide for prosecution, thus blocking a major avenue for generation and holding of black money in the form of Benami property, especially in real estate.
7.2 One of the most effective ways to deal with the generation of black money is to reduce the level of cash transactions in the economy. In furtherance of this objective of ushering in a less cash economy, the government took a slew of measures, the major ones being as under:
(i) Acceptance of cash payment of Rs. 20,000 or more for immovable property transaction was prohibited.
(iii) The threshold for cash donation to charitable trusts was reduced from Rs. 10,000 to Rs. 2,000.
(v) Profit rate for non-cash transactions in presumptive regime for businesses was reduced from 8% to 6%.
(i) Create specific tariff lines for specific products, presently classified as “others”;
(a) Empowering the proper officer to provisionally attach any bank account for safeguarding the government revenue and prevention of smuggling [section110].
Note: “Basic Excise Duty” means the excise duty set forth in the Fourth Schedule to the Central Excise Act, 1944.
“NCCD” means National Calamity Contingency Duty set forth in seventh schedule to Finance Act, 2001
A dispute resolution cum amnesty scheme called “the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019” is being introduced for resolution and settlement of legacy cases of Central Excise and Service Tax.
The proposed Scheme covers past disputes of taxes which have got subsumed in GST namely Central Excise, Service Tax and Cesses. All persons are eligible to avail the scheme except a few exclusions including as those convicted under the act in the case for which he intends to make declaration and those who have filed an application before the Settlement Commission.
The relief under the scheme varies from forty percent to seventy percent of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved. The scheme also provides relief from payment of interest and penalty. For voluntary disclosures, the relief is regarding waiver of interest and penalty on payment of full tax dues disclosed. The person discharged under the scheme shall also not be liable for prosecution.
The proposed changes in GST law shall come into effect from a date to be notified after the respective SGST Acts are also amended by the States.
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